Disclaimer: This is a lengthy post... take time to read it
Hi,
I invested into Birla SunLife Insurance Dream Plan (ULIP) through SIP 20K per annum. I am considering time horizon of 20 years.
I am quite new to ULIP and seeking valuable advise on this.
Thanks
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People invest into ULIP
NOT when they are new to ULIP but when they are new to overall theme behind Investment.
Investment should have only 1 sole purpose and that is to increase the value of your current assets at the minimum cost for such gains. ULIP can take as much as 75% in the first year and 25% in the 2-3 years.. thats not all... they suck nearly 5% every year till you are paying them.
If your time horizon is 20 years then I would advise you to have a mixed basket and like a swiss army knife have all of them in your kitty.
Gold some portion.. a must .. 10%
Equities.. a big MUST .. not more than 40%
Debt Funds .. act as protector & guarantor .. 10%
Reality .. 20%
FD .. act as guarantor and provide liquid cash when needed .. 20%
population is going to grow and no force in the world can stop it while land is limited unless ISRO comes with a solution to construct houses on Moon and you have a direct link to Moon
For Insurance take a seperate term insurance which can cost not more than 15K per annum for a protection of 1 Crore for 30-35 years of term.
Since we are talking about Insurance as well.. your actual insurance cover should be 20 times of your
Annual Salary to cover your liabilities after you and let your family enjoy the current lifestyle.
How? A simple calculation
Say you have annual liability of 7,00,000 out of your annual salary of 10,00,000
You should have insurance cover of 2,00,00,000 (2 Crore).. people may argue that its too much but realize what may happen if something happen to you and there is no way to pay your liabilities... so consider this calculation now if something happen to the insured person.
He gets 2 Crore back and looking at the average interest rate of FDs (say 6% per annum) the family put the entire sum in FD for a term of 10 years.
Annual return on FD is 12,00,000 - per annum without tax... enough to cover his liabilities and still have a plenty of amount left to enjoy the lifestyle.
At a cost of 30K per annum or Rs. 82 per day this is nothing when compared to ULIP which can give you max 20 times of your annual investment ... ie. 4,00,000 on annual investment of 20,000
After succesful completion of 20years ULIP would already suck near 10% of your investment and still there is no guarantee of return and insurance amount is close to nothing if you compare with the inflation rate.